ServiceMaster's TruGreen to split off as separate company

(Editor's note: TruGreen president David Alexander will report to a separate chairman and board of directors once the Memphis lawn-care firm is spun off by ServiceMaster Co. An earlier version of the story contained incorrect information.)

A year after losses piled up at TruGreen, ServiceMaster Co. will split off the residential lawn care division as a separate business.

Memphis-based ServiceMaster disclosed the restructuring Thursday and reported the company had swung to a third-quarter profit from a deep loss a year ago related to TruGreen.

Officials said TruGreen, a residential lawn care business, is recovering after technical challenges hindered service delivery, but remains on a slower growth path than the parent company, spokesman Peter Tosches said.

As a standalone firm, TruGreen would become one of the few Mid-South for-profit businesses with annual sales exceeding $1 billion. Its offices would remain in ServiceMaster's corporate headquarters in East Memphis. TruGreen employs 10,000 people throughout the nation including 275 in Memphis.

Clayton Dubilier Rice, the New York firm which led the 2007 buyout of ServiceMaster, will continue to own TruGreen.

ServiceMaster, one of the largest for-profit businesses based in the Memphis area, operates a network of national brands including Terminix, American Home Shield, ServiceMaster Clean, Merry Maids, Furniture Medic, TruGreen and AmeriSpec. The company employs 20,000 workers, including 2,400 in Memphis, and independent franchises employ another 31,000 workers.

"We've talked a lot over the past few months about the TruGreen turnaround, and it has now become clear that while we're making progress TruGreen is on a different earnings growth timeline than the rest of ServiceMaster," Rob Gillette, ServiceMaster chief executive officer, said in a statement released by the company.

TruGreen will split away "on or about December 31," the statement says and adds: "This separation should enable ServiceMaster to concentrate on growth while providing TruGreen the time and focus it needs to make the changes necessary to complete the turnaround of its business. Separating TruGreen from ServiceMaster should allow both companies to realize their full potential faster."

TruGreen president David Alexander will report to a separate chairman and board of directors once the Memphis lawn-care firm is spun off by ServiceMaster Co. ServiceMaster hired Alexander last December. He had been chief executive officer at Citi Trends, a publicly-traded urban retailer based in Savannah, Ga.

ServiceMaster is a private company, but certain securities issued before the 2007 takeover still trade publicly, so the company provides regular progress reports to investors.

ServiceMaster said third-quarter net income reached $46 million on $929 million in operating revenue. In the same period last year, losses totaled $704 million on $901 million in revenue.

The loss traced to goodwill and trade name impairment charges at TruGreen totaling $845 million.

TruGreen sales totaled $314 million in the latest quarter. Only Terminix's $334 million is larger within ServiceMaster.